Lessons of Poverty from Latin America

Across the globe, in rich and poor countries alike, efforts to boost educational attainment are closely linked to the fight against cyclical poverty. Education has long been the Achilles’ heel of Latin America, and this weakness continues to prevent the region from achieving its full economic promise. On the other hand, two remarkably effective Latin American programs are now being emulated by policy reformers throughout the Western Hemisphere, from Tegucigalpa to New York City, and elsewhere around the world.

Since its establishment in 1997, Mexico’s “Oportunidades” program (originally known as “Progresa”) has been offering conditional cash transfers to poor families who keep their children in school and bring them for routine health check-ups. The OECD calls it “one of the most innovative and successful programs targeting those living in extreme poverty or just above the threshold,” noting that Oportunidades has lifted both the rate of second-school enrollment and “the rate of successful transition from primary to secondary school.” Following the recent global financial crisis, Mexico expanded the program to help cushion the blow of a harsh economic downturn. It currently covers around 5 million Mexican households.

Brazil’s “Bolsa Família” program, which also started in the 1990s, uses the same basic approach: Poor parents are given monetary rewards if their children maintain satisfactory levels of school attendance and receive regular medical exams. Since taking office in 2003, the center-left government of Lula da Silva has greatly expanded the program, which now has roughly 12.4 million households enrolled.

Bolsa Família “has been a stunning success and is wildly popular,” says The Economist magazine, adding that both of Brazil’s top presidential candidates – Dilma Rousseff of the incumbent Workers’ Party and José Serra of the opposition Social Democratic Party – have been “competing to say who will expand it more.” (The election is on Oct. 3.) Brazil is still a country with huge social disparities, but according to the World Bank, overall income inequality declined by nearly 4.6 percent between 1995 and 2004.

The gains produced by Bolsa Família and Oportunidades have drawn global attention. Similar schemes have been launched in countries as diverse as Chile, Indonesia, South Africa, Turkey and the United States. In 2007, New York Mayor Michael Bloomberg created “Opportunity NYC,” a conditional cash-transfer program designed to incentivize better educational performance among students, better personal-health management among families and better workforce participation among adults. Before introducing the program, Bloomberg visited Mexico to learn more about Oportunidades and how it works in practice.

To be sure, neither the Mexican program nor its Brazilian counterpart represents a foolproof solution to the problems of entrenched poverty and educational failure. Oportunidades has encountered deliberate misreporting of family information by prospective beneficiaries hoping to game the system. In Brazil, meanwhile, it appears that Bolsa Família has worked significantly better in rural areas than in cities. In 2006, The Economist notes, the program covered about 41 percent of rural households but only 17 percent of urban households. True, rural Brazil suffers from extreme poverty, but cities such as Sao Paulo and Rio de Janeiro “contain some of the worst poverty in the country.”

How has Bolsa Família affected educational outcomes? As the New York Times recently reported, Brazil’s overall education system remains “a major weakness” in a country striving to become a global power. While recent years have seen significant progress – according to Brazilian education minister Fernando Haddad, middle-school graduation rates have climbed by 13 percentage points under the Lula administration – many Lula supporters expected more, and have thus been disappointed. “Brazil is trying to make up for lost time,” Haddad told the Times. “While other countries were investing in education we were wasting our time here saying that education was not that important.”

What, then, are the real lessons other countries can draw from Bolsa Família and Oportunidades? First and foremost, the two programs do not provide automatic handouts; they provide incentives. They have demonstrated that cash-transfer schemes are most effective when they are conditional – that is, when they demand behavioral changes from the recipients. This type of soft paternalism has proven far more successful than programs that dispense government money with no strings attached. Even the poorest slum-dwellers respond to incentives.

At the same time, Bolsa Família and Oportunidades also show that even the most efficient anti-poverty programs have a limited impact on education systems. Ultimately, well-designed cash-transfer policies can keep more students in the classroom and give them greater motivation to study hard, but such policies cannot magically transform test scores or improve teacher quality. If the schools and teachers themselves are failing to provide adequate instruction, the students will continue to lag behind many of their foreign peers.

Indeed, while Bolsa Família and Oportunidades have delivered remarkable reductions in abject poverty, Brazil and Mexico still must enact serious and modern education reforms.